If you live in your home for 2 out of 5 years, you are not subject to capital gains taxes at the time of sale on $250K/person or $500K/couple. So if you rent out your house today, and sell it November 2008, you would not meet the exemption and thus have to pay taxes on the profit from your sale. I don’t know how the profit is calculated (sale price – purchase price – expenses)? Paying taxes on the profit would really suck if you some of the profit was already spent via refinancing.